The World Bank released on January 16, 2025 its “Global Economic Prospects – January 2025” report in which it estimated world economic growth to have dropped from around 3.2% in 2022 to 2.7% in 2023, projecting growth to attain the 2.7% level throughout the 2024-2026 period. The World Bank commented that global growth seems to be stabilizing with inflation is dropping to reach its target levels, and monetary easing continues to foster activity in Advanced Economies and in Emerging Markets & Developing Economies (EMDEs). The report added, however, that while economic growth is expected to hold steady, such low levels are “insufficient” to support a sustainable economic development. The report added that such growth rates remain exposed to further headwinds such as an elevated policy uncertainty and unfavorable trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. The World Bank also revealed that low-income countries are set to enter the second quarter of the 21^st century with their per capita incomes converging to advanced economy living standards at a “substantially slow” pace.

The report revealed that growth in advanced economies dropped from circa 2.8% in 2022 to 1.7% in 2023, estimating said figure to have remained flat in 2024 and maintain the same level in 2025 before increasing to 1.8% in 2026. Concerning EMDEs, the World Bank estimated growth to have dropped slightly from 4.2% in 2023 to 4.1% in 2024 and to maintain the same rate in 2025 before inching downwards to 4.0% in 2026. The report added that EMDEs will be facing varying growth prospects during the year 2025. In details, and while growth is anticipated to be moderate in the East Asia and Pacific region on the back of a weak domestic demand in China and in Europe and Central Asia, growth is expected to pickup in Latin America & the Caribbean, the Middle East & North Africa as well as in Sub-Saharan Africa, supported by a robust domestic demand.

On the regional front, the World Bank estimated economic growth in the Middle East & North Africa (MENA) region to accelerate from 1.7% in 2023 and 1.8% in 2024 to 3.4% in 2025 and 4.1% in 2026. The report noted that economic growth for the year 2024 was hampered due to several reasons namely prolonged oil production cuts by oil producers added the geopolitical tensions and devastating economic impact of the conflict in Gaza and Lebanon. In addition, the attacks on ships in the Red Sea by Houthi rebels in Yemen have decreased transit through the Suez Canal, disrupted trade and increased policy uncertainty especially in neighboring countries. The report noted, however, that economic growth projection for the year 2025 for the MENA region is 1.4 percentage-points below the June 2024 forecast reflecting the oil production cuts. Delving further into details, the report mentioned that growth in oil-exporting MENA countries is expected to improve from an estimated 1.7% in 2024 to 3.3% in 2025 and 4.1% in 2026. As per the World Bank, inflation remained moderate across all GCC countries, mainly due to their pegged currencies to the U.S. dollar. As for oil-importing MENA countries, the report mentioned that growth is expected to have slowed from 2.7% in 2023 to 2.2% in 2024 on the back of the elevated inflation levels which have curbed the expansion of private sector demand, coupled with the impact of the conflict. The World Bank anticipated, however, growth to accelerate to 3.7% in 2025 and 4.0% in 2026, bolstered by a growing domestic demand and lower inflationary pressures. The World Bank commented that risks to the outlook of the region remain elevated, namely in the form of potential armed conflicts and unexpected global policy shifts. In details, lower global demand for oil and subdued lower oil prices could further extend the oil production cuts by OPEC+, reducing growth prospects in the process. On the other hand, an increase in protectionist measures by the trading partners of oil-importing countries could reduce exports.

On a local basis, the World Bank commented that Lebanon’s real GDP has contracted by 0.6% in 2022 and 0.8% in 2023, estimating economic contraction to have reached 5.7% in 2024 due to the ramifications of the escalation of the conflict. The report noted that forecasts beyond the year 2024 for Lebanon were removed due to a high degree of uncertainty. The report noted that inflation has slowed down as the exchange rate stabilized.